12-3575(L) Krys v. Sugrue

UNITED STATES COURT OF APPEALS 1

FOR THE SECOND CIRCUIT 2

S U M M A R Y O R D E R 3

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO 4 A SUMMARY ORDER FILED ON OR AF TER JANUARY 1, 2007, IS PERMITTED AND IS 5 GOVERNED BY FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT'S 6 LOCAL RULE 32.1.1. WHEN CITING A SUMM ARY ORDER IN A DOCUMENT FILED WITH 7 THIS COURT, A PARTY MUST CITE EI THER THE FEDERAL APPENDIX OR AN 8 ELECTRONIC DATABASE (WITH THE NOTATION "SUMMARY ORDER"). A PARTY 9 CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY PARTY NOT 10 REPRESENTED BY COUNSEL. 11

At a stated Term of the United St ates Court of Appeals for the S econd Circuit, held at the Thurgood

1 Marshall United States Courthouse at Foley Square, in the City of New York, on the 2nd day of August, 2 two thousand thirteen. 3

Present: AMALYA L. KEARSE, 4 ROSEMARY S. POOLER, 5 DEBRA ANN LIVINGSTON, 6 Circuit Judges

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KENNETH M. KRYS, as Joint Offi cial Liquidators of SPHINX LTD, 9 SPHINX STRATEGY FUND, LTD, SPHINX PLUS SPC LTD, SPHINX 10 DISTRESSED LTD, SPHINX MERGER ARBITRAGE LTD, SPHINX 11 MACRO LTD, SPHINX LONG/SHORT EQUITY LTD, SPHINX 12 MANAGED FUTURES LTD et al., as A ssignees of Claims assigned by 13 Miami Childrens Hospital Foundation, OFI, GREEN & SMITH 14 INVESTMENT MANAGEMENT LLC, KELLNER DILEO & CO. LLC, 15 MARTINGALE ASSET MANAGEMENT LP, LONGACRE FUND 16 MANAGEMENT LLC, ARNHOLD & S. BLEICHROEDER ADVISERS 17 LLC, et al., MARGOT MACINNIS, as a ssignee of claims assigned by Miami 18 Childrens Hospital Foundation, OFI ASSET MANAGEMENT, GREEN & 19 SMITH INVESTMENT MANAGEMENT LLC, THALES FUND 20 MANAGEMENT LLC, KELLNER DILEO & CO. LLC, MARTINGALE 21 ASSET MANAGEMENT LP, LONGACRE FUND MANAGEMENT LLC, 22-2- et al., as joint official liquidator of SPHINX LTD., SPHINX STRATEGY 1 FUND LTD., SPHINX PLUS SPC LTD, SPHINX DISTRESSED LTD., 2 SPHINX MERGER ARBITRAGE, LTD ., SPHINX SPECIAL SITUATIONS 3 LTD., SPHINX MACRO LTD., et al., HARBOUR TRUST CO. LTD., as 4 Trustee of the Sphinx Trust, 5

Plaintiffs-Appellants

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CHRISTOPHER STRIDE, as Joint Offi cial Liquidators of SPHINX LTD, 7 SPHINX STRATEGY FUND, LTD, SPHINX PLUS SPC LTD, SPHINX 8 DISTRESSED LTD, SPHINX MERGER ARBITRAGE LTD, SPHINX 9 MACRO LTD, SPHINX LONG/SHORT EQUITY LTD, SPHINX 10 MANAGED FUTURES LTD et al., as Assignees of Claims assigned by 11 Miami Childrens Hospital Foundation, OFI, GREEN & SMITH 12 INVESTMENT MANAGEMENT LLC, KELLNER DILEO & CO. LLC, 13 MARTINGALE ASSET MANAGEMENT LP, LONGACRE FUND 14 MANAGEMENT LLC, ARNHOLD & S. BLEICHROEDER ADVISERS 15 LLC, et al., JAMES P. SINCLAIR, as Trustee of the Sphinx Trust, 16

Plaintiffs

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- v. - Nos. 12-3575(L) 18 12-3586(C) 19

WILLIAM T. PIGOTT, LIBERTY CORNER CAPITAL STRATEGIES, LLC, 20 INGRAM MICRO, INC., CIM VENTURES INC., 21 Defendants-Appellees

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CHRISTOPHER SUGRUE, MARK KAVANAGH, BRIAN OWENS, 23 GRANT THORTON LLP, MARK RAMLER, MAYER BROWN LLP, FKA 24 Mayer Brown Rowe & Maw LLP, JOSEPH COLLINS, EDWARD S. BEST, 25 PAUL KOURY, PHILLIP R. BENNETT, ROBERT C. TROSTEN, TONE 26 GRANT, SANTO MAGGIO, THOMAS HACKL, DENNIS A. KLEJNA, 27 BAWAG P.S.K., BANK FUR ALBEIT UND WIRTSCHAFT UND 28 OSTERREICHISCHE POSTEPARKASSE AKTIENGESELLSCHAFT, JP 29 MORGAN CHASE & CO., CREDIT SUISSE SECURITIES (USA) LLC, 30 FKA Credit Suisse First Boston LLC, BANK OF AMERICA SECURITIES 31 LLC, THOMAS H. LEE ADVISORS, LLC, THL MANAGERS V. LLC, THL 32 EQUITY ADVISORS V. L.P., THOMAS H. LEE EQUITY (Cayman) FUND 33 V. L.P., THOMAS H. LEE INVE STORS LIMITED PARTNERSHIP, 1997 34 THOMAS H. LEE NOMINEE TRUST, THOMAS H. LEE, SCOTT L. 35 JAECKEL, SCOTT A. SCHOEN, EMF FINANCIAL PRODUCTS, EMF 36 CORE FUND, DELTA FLYER FUND, LLC, ERIC M. FLANAGAN, 37 BECKENHAM TRADING CO. INC., ANDREW KRIEGER, COAST ASSET 38-3- MANAGEMENT LP, FKA Coast Asset Management LP, CS LAND 1 MANAGEMENT LLC, REFCO GROUP HOLDINGS INC., MARI FERRIS, 2 THOMAS H. LEE PARTNERS, L.P., THOMAS H. LEE EQUITY FUND V, 3 L.P., PRICEWATERHOUSECOOPERS L.L.P., GIBSON, DUNN & 4 CRUTCHER LLP, REFCO ALTERNATIVE INVESTMENTS LLC, ERNST 5 & YOUNG U.S. LLP, DAVID V. HARKINGS, CHRISTOPHER PETTIT, 6 REFCO ASSOCIATES, INC., PRICEWATERHOUSECOOPERS CAYMAN 7 ISLANDS, MITCHELL A. KARLAN, SCOTT KISLIN, COAST ASSET 8 MANAGEMENT LP, ERNST & YOUNG LLP, THOMAS H. LEE 9 PARALLEL FUND V, L.P., MAYER BROWN INTERNATIONAL LLP, 10 MERRIL LYNCH, PIERCE, FENNER & SMITH, INCORPORATED, 11

Defendants

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For Appellants: LEO R. BEUS, Phoenix, Ariz. (Lee M. Andelin, Beus Gilbert, Phoenix, 14 Ariz., David J. Molton, Andrew Dash, Brown Rudnick, New York, N.Y., 15 on the brief). 16

For Appellees Liberty 17 Corner Capital 18 Strategies, LLC, and 19 William T. Pigott: KEVIN H. MARINO, Chatham, N.J. (John D. Tortorella, Roseann Bassler 20 Dal Pra, Marino, Tortorella & Boyle, Chatham, N.J., on the brief). 21

For Appellees Ingram 22 Micro, Inc., and CIM 23 Ventures, Inc.: ROBERT F. WISE, New York, N.Y. (Davis Polk & Wardwell, New York, 24 N.Y., on the brief). 25

Appeal from the United States District Court for the Southern District of New York. 26

ON CONSIDERATION WHEREOF, it is now hereby ordered, adjudged, and decreed that the 27 matter be remanded for supplementation of the record consistent with this order. 28

Plaintiffs Kenneth M. Krys et al . appeal from a July 31, 2012 judgment of the United States District 29 Court for the Southern District of New York, Jed S. Rakoff, Judge , entered pursuant to a July 28, 2012 30 order ("July Order"), dismissing, with prejudice, their claims against defendants William T. Pigott, Liberty 31 Corner Capital Strategies, LLC, Ingram Micro, Inc ., and CIM Ventures Inc. (collectively "appellees") 32-4- pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiffs' amended complaint alleges, inter alia , that 1 appellees and certain other defendants--against someof whom plaintiffs' claims apparently remain 2 pending--provided sham loans to defendant Refco Group Ho ldings Inc. to allow Refco Inc. to hide Refco 3 Inc.'s insolvency from customers, thereby aiding and abetting frauds and breaches of fiduciary duty. In 4 October, the district court amended its July Order toinstruct that a partial final judgment dismissing the 5 claims against appellees be entered "in accordance w ith Rule 54(b), the Court having determined there is 6 no just reason for delay." Order dated October 27, 2012 ("October Order"). For the reasons that follow, 7 we remand this matter for the district court to supplement the record with an e xplanation of its Rule 54(b) 8 determination. 9

Rule 54(b) gives the district court authority to enter a final judgment as tofewer than all of the 10 parties in a multi-party litigation, thereby permitting an immediate appeal before the action is concluded, 11 "only if the court expressly determines that there is no just reason for delay." Fed. R. Civ. P. 54(b). But 12 "[n]ot all final judgments on individual claims should beimmediately appealable, even if they are in some 13 sense separable from the remaining unresolved claims ." Curtiss-Wright Corp. v. General Electric Co. , 446 14 U.S. 1, 8 (1980) ("Curtiss-Wright "). 15

[I]n deciding whether there are no just reasons to delay the appeal of individual final 16 judgments . . . a district court must take into account judicial administrative interests as 17 well as the equities involved. Consideration of the former is necessary to assure that 18 application of the Rule effectively "preserves the historic federal policy against piecemeal 19 appeals." 20

Id . (quoting Sears, Roebuck & Co. v. Mackey , 351 U.S. 427, 438 (1956) ("Sears ")). Ultimately, "the 21 decision to certify" is "left to the sound judicial discreti on of the district court. At the same time, . . . 'any 22 abuseof that discretion remains reviewable by the Court of Appeals.'" Curtiss-Wright , 446 U.S. at 10 23 (quoting Sears , 351 U.S. at 437 (emphasis in Curtiss-Wright)). 24

"[T]he standard against which a district court's exercise of [this] discretion is to be judged is the 25 'interest of sound judicial administration .'" Curtiss-Wright , 446 U.S. at 10 (quoting Sears , 351 U.S. at 437) 26 (emphasis ours). "[T]he proper role of the court of appeals is not to re weighthe equities or reassess the 27 facts but to make sure that the conclusions derive d from those weighings and assessments are juridically 28 sound and supported by the record ." Curtiss-Wright , 446 U.S. at 10 (emphases added). 29

A statement by the district court only of its conc lusion that "there is no just reason for delay," 30 unaccompanied by any explanation of the assessments that led to that conclusion, is insufficient to permit 31 this Court to conduct the abuse-of-discretion review. See , e.g. , Harriscom Svenska AB v. Harris Corp.

, 32 947 F.2d 627, 630 (2d Cir. 1991) ("Absent an explanation by the district court, we have no basis for 33 conducting a meaningful review of the district court's exercise of its discretion."); National Bank of 34 Washington v. Dolgov , 853 F.2d 57, 58-59 (2d Cir. 1988) (given a certification that only tracked the 35 language of Rule 54(b), without an explanation, dismissing the appeal fo r lack of appellate jurisdiction); 36 Cullen v. Margiotta , 618 F.2d 226, 228 (2d Cir. 1980) (same); Arlinghaus v. Ritenour , 543 F.2d 461, 463- 37 64 (2d Cir. 1976) (same). To allow an immediate appeal, the district court's conclusion "must be 38 accompanied by a reasoned, even if brief, explanation of its conclusion." O'Bert ex rel. Estate O'Bert v. 39 Vargo , 331 F.3d 29, 41 (2d Cir. 2003). 40-5- In the present case, the district court's July Order dismissing the claims against appellees did not 1 indicate that a partial final judgment should be entere d. Its October Order provided for the entry of such 2 a judgment "in accordance with Rule 54(b), the Court having determined there is no just reason for delay"; 3 but it provided no explanation for that determination. It is unclear whether or to what extent the dismissed 4 claims are unrelated to claims that remain pending. Indeed, the same causes of action asserted against 5 appellees are also asserted against several other defendants (see , e.g. , Amended Complaint ¶ 1016), and 6 the claims against at least some of those other defendants apparently remain pending. Without an 7 explanation as to why the district court concluded that an immediate final judgment as to these appellees 8 was appropriate, we are unable to assess whether th at conclusion, given the interests of sound judicial 9 administration, e.g. , avoiding requiring two (or more) appellate panels to review the same or closely 10 related issues, was within the bounds of the district court's discretion. 11

Rather than immediately dismissing this appeal for lack of final judgment, however, we remand 12 pursuant to the procedure set out in United States v. Jacobson , 15 F.3d 19, 22 (2d Cir. 1994), for the 13 district court to supplement the record with a reasone d, even if brief, explanation for why an immediate 14 appeal of the dismissal of the claims against appell ees is appropriate. The mandate shall issue forthwith. 15 This appeal will be reinstated, w ithout need for a new notice of app eal, upon notice by either side to this 16 Court by letter that the district court has supplemented the record or upon the expiration of 30 days, 17 whichever occurs sooner. The matter shall be referred to this panel for disposition of the appeal. 18

FOR THE COURT: 19 CATHERINE O'HAGAN WOLFE, Clerk of Court 20

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